LOS ANGELES (Reuters) - Atlantic City, New Jersey, has been hurt as casinos open in neighboring Pennsylvania, but the impact is likely to lessen over time, the chief executive of Mohegan Sun said on Monday.
Atlantic City casino operators, which include Harrah's Entertainment Inc. HET.N, Trump Entertainment Resorts Inc. (TRMP.O: Quote, Profile, Research, Stock Buzz) and Boyd Gaming Corp. (BYD.N: Quote, Profile, Research, Stock Buzz), reported a combined 7.2 percent drop in slot machine revenue in January, in part due to increased competition from Pennsylvania.
But Mohegan Sun, which opened Pocono Downs -- the first racetrack with slot machines in Pennsylvania -- late last year, expects the impact on Atlantic City to level off over time as the novelty factor of Pennsylvania casinos wears off, Mohegan Sun Chief Executive Mitchell Etess said, speaking at the 2007 Reuters Hotels and Casinos Summit in Los Angeles.
"It really isn't the same as going to a full-destination place," Etess said, adding that the overall market could even grow. "Often times people find that these convenience locations really create gamblers."
Connecticut-based Mohegan Sun is owned by the Mohegan Tribal Gaming Authority. It also has alliances for casinos in Wisconsin and Washington state.
Pennsylvania handed out licenses last year to companies to install slot machines at racetracks and stand-alone casinos in the state.
But Pennsylvania casinos are constrained by a higher tax rate than that in Atlantic City, Etess said. "The amount you can invest in your marketing program is limited by it."
It ultimately might result in fewer visits to Atlantic City per year, Etess said, but added that it would take some time before the final picture emerges.
When Borgata Hotel Casino & Spa, a joint venture between MGM Mirage (MGM.N: Quote, Profile, Research, Stock Buzz) and Boyd, opened in Atlantic City in 2003, Mohegan Sun saw slower growth at its Connecticut casino for a few months as people tried the new casino, Etess said.
"People are going to see those places," Etess said, referring to new slot machine facilities that are set to open in Pennsylvania. "And then they are going to decide if that is a reasonable substitute for going to Atlantic City."
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